Canada's Hydro One IPO prices near high end of range

John Tilak, Euan Rocha

3 Min Read

TORONTO (Reuters) - Ontario electric utility Hydro One’s [HYDRO.UL] initial public offering priced at C$20.50 per share on Thursday, raising C$1.66 billion ($1.26 billion) and marking one of the biggest IPOs in Canadian history.

The pricing suggested demand was high for a roughly 15 percent stake in the province’s largest electric utility.

Earlier this month, the government of Ontario outlined plans to sell up to 89.25 million Hydro One shares in an IPO that was expected to price between C$19 and C$21 a share, valuing the company between C$11.31 billion and C$12.5 billion.

Reuters reported on Wednesday that the offering was expected to price at the high end of that range.

The shares, which will list on the Toronto Stock Exchange under the ticker symbol “H”, are expected to begin trading on Nov. 5.

The offering saw “extraordinarily strong demand,” said Ed Clark, chair of the Ontario premier’s advisory council on government assets. “The offering was significantly oversubscribed.”

“This has been textbook run. There’s tremendous interest. The market is obviously enthusiastic about it,” said Clark, the former chief executive of Toronto-Dominion Bank (TD.TO).

Some 40 percent of the offering has been allocated to retail investors, the company said in a statement on Thursday.

If, as expected, the IPO’s underwriters exercise the over-allotment option tied to the deal, the province will raise about C$1.83 billion in total from the deal.

STRONG DEMAND

“Having a Hydro One heavyweight will help balance out the resource-heavy Canadian market,” he said, adding that it also offers an opportunity to invest in a public utility as it has been “slim pickings” until now.

The privatization of the utility will allow the province to fund transportation infrastructure projects, including public transit, bridges and highways, Ontario Minister of Energy Bob Chiarelli said in a statement.

Royal Bank of Canada (RY.TO) and Bank of Nova Scotia (BNS.TO) are the lead underwriters on the deal.